OKLAHOMA CITY, May 22 /PRNewswire-FirstCall/ -- Tronox Incorporated is taking further actions to reduce cash costs and has identified factors that will impact its second-quarter financial results. The company expects costs to be higher in the second quarter compared to the first quarter due to increasing freight, process chemical and energy costs. In addition to these increases, the Uerdingen, Germany, and Kwinana, Western Australia, facilities have encountered production difficulties coming back online after planned shutdowns.
"The ongoing increases we are experiencing in energy, process chemical and freight costs continue to more than offset our cost reduction programs in the second quarter," said Tom Adams, Tronox chairman and chief executive officer. "In addition, pricing in Europe is being pressured by the high level of TiO2 exports out of North America into Europe due to the weak North American demand and strong euro. In response to these ongoing challenges, we are implementing additional steps to reduce costs and continuing our efforts to increase prices. We also continue to evaluate all strategic alternatives, including business development opportunities, mitigation of legacy liabilities, capital restructuring and land sales."
Second-Quarter Production Difficulties
The Tiwest TiO2 plant in Kwinana experienced production difficulties after a planned shutdown. The shutdown had to be extended due to operational difficulties and subsequent challenges that arose during start-up of the plant. The plant is in the process of ramping back up to full production. Tiwest, a 50/50 joint venture between Tronox and South African-based Exxaro Resources Limited (JSE Limited: EXX) subsidiary Yalgoo Minerals Pty Ltd, is one of the world's largest fully integrated, from mining to finished product, titanium dioxide projects.
The company also recently experienced processing difficulties at its Uerdingen facility following a planned maintenance outage that resulted in reduced production volumes and higher costs.
Tronox expects the impact of the Kwinana and Uerdingen difficulties will be in the range of approximately $10 million to $12 million (pretax) in the second quarter.
Work Force Reduction
Through a reduction in its U.S. work force and suspension of its employee incentive plan and 401(k) matching contribution program, the company expects to achieve further reductions in its selling, general and administrative costs (SG&A), as well as cost of goods sold. Tronox projects its SG&A for 2008 will be in the range of $104 million to $108 million, a $9 million decrease from its original guidance for the year. Tronox is reducing its U.S. salaried work force by approximately 13% or 68 positions. Approximately half of these positions have already been vacated this year and have not been filled as a result of the company's ongoing hiring freeze. Tronox expects to record a second-quarter charge in the range of $4 million to $5 million (pretax) related to severance and special termination benefits.
Cost and process improvement plans for Tronox's Uerdingen operations are being developed, and the company will provide cost reduction expectations after the plan is completed mid-year.
Headquartered in Oklahoma City, Tronox is the world's third-largest producer and marketer of titanium dioxide pigment, with an annual production capacity of 642,000 tonnes. Titanium dioxide pigment is an inorganic white pigment used in paint, coatings, plastics, paper and many other everyday products. The company's five pigment plants, which are located in the United States, Australia, Germany and the Netherlands, supply high-performance products to approximately 1,100 customers in 100 countries. In addition, Tronox produces electrolytic products, including sodium chlorate, electrolytic manganese dioxide, boron trichloride, elemental boron and lithium manganese oxide. For information on Tronox, visit http://www.tronox.com/.
Forward-Looking Statements: Some information in this news release regarding the company's or management's intentions, beliefs or expectations, or that otherwise speak to future events, are "forward-looking statements" within the meaning of Section 27A of the Securities Exchange Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements include those statements preceded by, followed by or that otherwise include the words "believes," "will," "expects," "anticipates," "intends," "estimates," "projects," "target," "budget," "goal," "plans," "objective," "outlook," "should," or similar words. Future results and developments discussed in these statements may be affected by numerous factors and risks, such as the accuracy of the assumptions that underlie the statements, the market value of Tronox's products, demand for consumer products for which Tronox's businesses supply raw materials, the financial resources of competitors, the market for debt and/or equity financing, changes in laws and regulations, the ability to respond to challenges in international markets, changes in currency exchange rates, political or economic conditions in areas where Tronox operates, trade and regulatory matters, general economic conditions, and other factors and risks identified in the Risk Factors Section of Tronox's Annual Report on Form 10-K for the year ended December 31, 2007, and subsequent Quarterly Reports on Form 10-Q, as filed with the U.S. Securities and Exchange Commission (SEC), and other SEC filings. Actual results and developments may differ materially from those expressed or implied in this news release. The company does not undertake to update forward- looking statements to reflect the impact of circumstances or events that arise after the date the forward-looking statement was made. Investors are urged to consider closely the disclosures and risk factors in Tronox's Annual Report on Form 10-K for the year ended December 31, 2007, available on Tronox's website, http://www.tronox.com/. This also can be obtained from the SEC by calling 1-800-SEC-0330.
Media Contact: Debbie Schramm
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Cell: 405-830-6937
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